Tesco seals retail deal in India
Mumbai, March 21: Tesco, the £72-billion British retailer, today announced that it had picked up a 50 per cent stake in Tatas-owned Trent Hypermarket Ltd (THL), becoming the first global supermarket chain to enter India’s multi-brand retail segment.
The world’s second-largest retailer by profits will invest £85 million (or Rs 850 crore) in THL.
In a separate filing with the Bombay Stock Exchange, Tatas-owned Trent said Tesco Overseas Investments, a wholly-owned subsidiary of Tesco, would purchase a part of the equity shares that Trent held in THL for an amount of
Rs 150 crore.
Tesco Overseas would separately subscribe to additional THL equity shares for Rs 700 crore, the filing said.
It added that the proposed investment by Tesco Overseas was subject to necessary approvals.
THL operates the Star Bazaar and Star Daily retail businesses in India.
Last December, Tesco had won an approval from the Foreign Investment Promotion Board (FIPB) to pick up the stake in THL.
Tesco was the first foreign retailer to win an approval to enter the arena after the UPA government relaxed its policy in September 2012 to allow up to 51 per cent foreign investment in multi-brand retail operations.
Under the rules, foreign investors were required to invest at least $100 million in the retailing venture.
THL runs hypermarkets under the Star Bazaar brandname in four states which stock Tesco products under an arrangement.
Since 2008, Trent Hypermarket Ltd had a franchise and a wholesale supply arrangement with Tesco Plc and its wholly-owned Indian subsidiary, Tesco Hindustan Wholesaling Pvt Ltd, respectively. The exclusive franchise agreement granted Star Bazaar access to Tesco’s extensive retail expertise and technical capability.
Star Bazaar, a multi-format hypermarket chain, has 15
discount stores — three in Mumbai, four in Bangalore, two each in Ahmedabad and Pune, and one each in Aurangabad, Surat, Chennai and Kolhapur.
At present, Gujarat and Tamil Nadu — two states where Star Bazar retail outlets already exist — are opposed to FDI in multi-brand retail.
The two partners are aware of the opposition in several states to their collaboration. And that is why they had said in a press release last December that the “proposed partnership will operate and build on the existing portfolio of Star Bazaar stores in Maharashtra and Karnataka” — the two states that aren’t opposed to the idea.
Trent Hypermarket Ltd recorded a 21 per cent increase in total revenues at Rs 785.19 crore in 2012-13 from Rs 649.51 crore in the previous year. But it reported negative earnings before interest and tax (EBIT) of Rs 64 crore.